Fossil Fuel Subsidies: The Myth of a Free Market Shattered

My Republican colleagues typically comment on renewable energy, that if it is viable it would survive without subsidies. They point to fossil fuels and claim that green energy should receive the same treatment, i.e. only market-based revenue and investment. But this myth is wholly at odds with the reality around the world.

Fossil fuels have been one of the most heavily subsidized human endeavors in the history of the world. The International Monetary Fund report, just released, notes that globally fossil fuels receive approximately $600 million a HOUR in government support. See PL article. The basis of this huge cost figure is the externalities of fossil fuel burning (mainly coal). There are several new reports of the huge external cost of burning coal in Poland (which leads Europe in air pollution for fossil fuels).

But even the narrow definition of subsidies for internal costs results in a big figure for support. Over 10 billion Euro a year in Europe (where the policy is to allegedly decarbonize the economy). In Poland, from 1990 to 2012, the Warsaw Institute for Economic Studies estimated that 40 billion Euro was spent in direct subsidies for the coal industry, excluding a much higher external cost.  Even Germany, last year provided more support for coal than any other technology in the energy mix except for PV solar.Even the majoprity of renewable energy support in Poland ended up going to support coal-fired power plants by virtue of rewarding co-firing vastly more than its actual costs.See Mott's Blog, "The New Law Must Reduce Support For Co-Firing To Reflect Its Actual Low Cost Of Production," October 8, 2014.

Exploration for oil in the United States amount to over $5 billion a year. See Harvard Magazine 2014.

Some point out that renewable energy globally gets proportionally more support than fossil fules (about three times as much per energy unit). But the notion that fossil fuels developed and arfe sustained solely by market mechanisms is a myth.

We are also witnessing the achievement of parity in the market place between many forms of renewable energy and conventional fossil fuels. This date has long been anticipated, but has already arrived in some geographic regions of the world.


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